http://www.reuters.
Cemex may escape Venezuela cement nationalization
Mon Apr 7, 2008
12:13pm EDT
By Robin Emmott
MONTERREY, Mexico, April 7 (Reuters) - Mexico's Cemex, the world's No. 3
cement company, could avoid Venezuela's planned nationalization of its
cement industry because Cemex's operations have always been in private
hands, a company source and analysts said on Monday.
Venezuela President Hugo Chavez, who announced a cement takeover plan
last week to increase government influence in key industries, said in
comments published on Monday that his plans will only affect companies
privatized by previous governments.
Shares in Monterrey-based Cemex(CX.N: Quote, Profile,
Research)(CMXCPO.
falling sharply late last week. The company's Mexico City-listed stock
rose 3.49 percent to 28.80 pesos, while in New York, its shares rose 4
percent to $27.40.
A source close to Cemex said on Monday the company had entered the
Venezuelan market in 1994 with the purchase of Vencemos, which was never
a state-owned company.
"It was always owned by the Mendoza family," the source said. Cemex has
not yet been notified by the Venezuelan government of any takeover, the
source said, adding that could be a positive sign.
Analysts were cautiously optimistic. "The fact that Cemex did not buy a
privatized company could help, although it is tough to say what is going
on in Chavez's mind," said Carlos Peyrelongue at Merrill Lynch.
Cemex's efforts to meet Venezuelan demands that it should prioritize
domestic demand and reduce exports and Cemex's cement discounts for the
poor could also help, said Marcelo Telles of Credit Suisse.
"Mr. Chavez's arguments for nationalizing Cemex's Venezuela operations
would appear groundless," he wrote in a note.
Being forced out of Venezuela would not deeply affect Cemex's overall
profitability, as the Venezuela operations only accounted for 4 percent
of the group's total earnings before interest, tax, depreciation and
amortization (EBITDA) in 2007.
"But it would be positive if Cemex could stay in Venezuela, where it is
achieving double-digit sales and EBITDA growth," said Francisco Chavez
at BBVA Bancomer.
The Mexican government has strongly condemned the possible takeover of
Cemex's Venezuelan holdings, saying the property and rights of Mexicans
were not being respected.
Since Chavez tried to seize the presidency in a botched coup in 1992 he
has promised to reverse privatizations that happened under previous
governments.
Since winning power at the ballot box in 1998, he has implemented much
of his pre-coup program.
Cemex's global competitors including Lafarge (LAFP.PA: Quote, Profile,
Research) of France and Switzerland'
Research) operate in Venezuela. (Editing by Derek Caney)
© Reuters 2007.
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